Turkey: 2017 FCPA Enforcement Actions and Highlights

Overall, this was a less active year in terms of Foreign Corrupt
Practices Act ("FCPA") enforcement actions, at least when
compared to 2016. In 2017, the Department of Justice
("DOJ") took a total of 9 enforcement actions and the
Securities and Exchange Commission ("SEC") took a total
of 7 enforcement actions. Therefore, we observe that the DOJ has
been more active than the SEC in terms of the number of enforcement
actions this year. So far in 2017, we have witnessed only 2
declinations within the scope of the Pilot Program,[1] as opposed to 5 declination
decisions in 2016.

Of the 9 enforcement actions taken by the DOJ, 5 of them were
related to real persons. 2 individuals were charged with offenses
within the scope of the 7 SEC enforcement actions.

2017 marks another year in which enforcement actions against
individuals were lower in number than the enforcement actions taken
against corporations. The Yates Memo, which was published on 2015,
underlined the significance of individual accountability for
deterring corporate wrongdoing, and provided guidelines as to how
to enforce and ensure such accountability. Nevertheless, the total
number of FCPA enforcement actions taken against individuals so far
is 7, as opposed to 12 enforcement actions brought against
corporations.

DOJ Declination Decisions

In June 2017, the DOJ closed its investigation with regard to
Linde North America, Inc., and Linde Gas North America, LLC
(collectively known as "Linde"). According to the DOJ,
Spectra Gases, Inc. ("Spectra"), a company that Linde
acquired in 2006, bribed foreign public officials in the Republic
of Georgia between 2006 and 2009, in relation to Spectra's
transactions with the National High Technology Center
("NHTC"), a state-owned and state-controlled entity in
Georgia. The DOJ records indicate that three high-level executives
of Spectra entered into an arrangement with NHTC officials and a
third-party intermediary, whereby the parties would share the
profits of income-producing products sold by NHTC to Spectra.
Throughout the course of this scheme, Spectra entered into an
agreement with a company established by NHTC officials, which
allegedly provided consultancy services to Spectra, and, in return,
received a certain amount of profit from the transaction in
question. After Linde learned of the corrupt arrangement, it
withheld the $10 million payment due to Spectra executives, and
refused to make any further payments that were due to the companies
controlled by NHTC officials. The DOJ's declination decision
was based on this withholding of payments (which was viewed and
categorized as a remediation step), Linde's timely and
voluntary disclosure, full cooperation, its termination of the
employees and business partners who had taken part in the corrupt
arrangement, and the fact that it had agreed to disgorge any
profits it had received due to the corrupt arrangement, among
others.

In June 2017, the DOJ closed its investigation with regard to
CDM Smith, Inc. ("CDM"), a Boston-based engineering and
construction firm. According to the DOJ, CDM and its subsidiary in
India had paid approximately $1.18 million in bribes to Indian
government officials through various employees and agents, in order
to secure construction contracts. The bribes, which were funneled
through subcontractors, were generally in the range of 2-4% of the
contract price. The subcontractors provided no actual services and
they were aware that the payments were being made for the benefit
of public officials. All members of the senior management of CDM
India had taken part in this scheme. Among others, the DOJ's
declination decision was based on CDM's timely and voluntary
self-disclosure, its full cooperation, its comprehensive
investigation of the matter, and the fact that it had agreed to
disgorge profits resulting from the scheme.

DOJ Enforcement Actions

In January and October 2017, three individuals (Juan Jose
Hernandez Comerma, Charles Quintard Beech III, and Fernando Ardila
Rueada), who were all owners or partial owners of energy companies,
pleaded guilty to a bribery scheme related to Venezuela's
state-owned and state-controlled energy company, Petroleos de
Venezuela S.A. ("PDVSA"). According to their statements
and admissions, all three had paid bribes so that their company
could enter into contracts with PDVSA. Public officials had been
entertained based on the contracts that had been awarded thanks to
the actions and decisions of the relevant officials. Beech also
admitted that he had conspired to hide the nature of the corrupt
payments through various financial schemes and transactions.

In January 2017, Zimmer Biomet Holdings, Inc.
("Biomet"), a medical device manufacturing company,
agreed to pay a $17.4 million penalty to the DOJ, and more than $13
million to the SEC, for having violated the deferred prosecution
agreement ("DPA") that it had entered into in 2012.
According to the SEC and the DOJ, Biomet continued to do business
with a prohibited distributor in Brazil, which was notorious for
its corruption and bribed a Mexican customs official via a customs
broker. Biomet was deemed not to have established adequate internal
control systems, as red flags suggesting bribery were continuously
ignored.

In January 2017, a Chilean-based chemical and mining company
called Sociedad Quimica y Minera de Chile S.A. ("SQM")
agreed to pay a $15 million penalty to settle the SEC's charges
and a $15.5 million penalty as part of a deferred prosecution
agreement with the DOJ. According to the company's admissions,
SQM had made donations to numerous foundations affiliated with
Chilean politicians. For example, SQM paid around $630,000 to a
foundation controlled by a Chilean official who had influence over
a key part of SQM's business in Chile. Furthermore, SQM hid
these payments under the guise of payments for consulting and
professional services, which it never received.

In January 2017, Las Vegas Sands Corp. ("Sands"), a
Nevada-based gaming and resort company, entered into a
non-prosecution agreement ("NPA") with the DOJ, and
agreed to pay a fine of nearly $7 million for its FCPA violations.
According to the company's admissions, Sands knowingly and
willfully failed to implement an internal controls system in order
to ensure that the company books and records were complete and
accurate. Sands paid approximately $5.8 million to a business
consultant without any apparent legitimate business purpose. In
fact, the consultant was a former official of People's Republic
of China ("PRC") and had offered its assistance to Sands
based primarily on the qualification that it had political
connections with PRC officials. Sands did not carry out any
enhanced due diligence regarding the consultant or its dubious
business practices, despite the numerous red flags. An employee of
the finance department, along with an outside auditor, had warned
the company that some of the payments made to the consultant could
not be accounted for. Sands terminated the finance-department
employee who had raised this issue. In 2016, Sands had paid $9
million to the SEC in a parallel investigation.

In July 2017, Amadeus Richers, the former general manager of an
American telecommunications company, pleaded guilty to the charge
of conspiring to violate the FCPA. According to his admission,
Richers (along with his co-conspirators) had paid about $3 million
to Haitian government officials in order to obtain business in
relation to Telecommunications D'Haiti, the state-owned and
state-controlled telecommunications company in Haiti. Some of the
bribes had been paid through third-party intermediaries, and others
had been paid directly to officials or to the relatives of those
officials. Richers, a German citizen living in Brazil, was
sentenced to time served, 3 years of supervisory release, and also
ordered to pay a criminal monetary penalty of $100.

In September 2017, a Swedish telecommunications company, Telia
Company AB ("Telia"), entered into a global settlement
with the SEC, the DOJ and the Dutch and Swedish law enforcement
agencies. Telia and its Uzbek subsidiary, Coscom LLC
("Coscom"), agreed to pay a total penalty of more than
$965 million to resolve charges with regard to a bribery scheme in
Uzbekistan. According to the records of the SEC and the DOJ, Telia
and Coscom had bribed an Uzbek government official in the amount of
at least $331 million. According to the SEC, Telia paid the bribes
to a shell company, which was controlled by a family member of the
Uzbek president, in the guise of payments for lobbying and
consulting services, which were never obtained. The penalty payment
of $965 million may be offset by the fines paid to Swedish and
Dutch authorities.

In October 2017, Joseph Baptiste, a retired U.S. Army Colonel,
was charged in an indictment for allegedly taking part in a foreign
bribery and money laundering scheme with regard to an $84 million
port-development project in Haiti. Mr. Baptiste allegedly solicited
bribes from undercover FBI agents, who were acting as potential
investors. Mr. Baptiste allegedly told the agents that the payment
would be made to Haiti officials through a non-profit that he
controlled. Mr. Baptiste allegedly took approximately $50,000 from
the agents for the bribes, and used the money for his personal
dealings, but he allegedly also intended to receive more money for
the bribes.

SEC Enforcement Actions

In January 2017, Mondelez International, Inc., a US-based food
beverage and snack manufacturer, along with its subsidiary, Cadbury
Limited ("Cadbury"), agreed to pay a $13 million civil
penalty to settle SEC charges with regard to the violation of the
internal controls and books-and-records provisions of the FCPA.
According to the SEC, Mondelez acquired Cadbury and its
subsidiaries, including Cadbury India Limited ("Cadbury
India"), in February 2010. Subsequently, Cadbury India hired
an agent in order to obtain licenses and approvals for a factory in
India. However, it did not conduct appropriate due diligence or
sufficiently monitor the agent. After receiving payments from
Cadbury India Limited, the agent withdrew most of the money (a
total of $90,666) from the account in cash. According to the SEC,
Cadbury India failed to keep accurate books and records with
regards to the agent's purported services, and Cadbury failed
to implement adequate controls regarding its subsidiary, Cadbury
India.

In January 2017, Orthofix International ("Orthofix"),
a Texas-based medical device company, agreed to admit wrongdoing
and pay a fine of more than $14 million to the SEC. The
settlement relates to two offenses: The SEC found that Orthofix had
booked certain revenues improperly and had made payments to doctors
who worked in a state-controlled hospital in Brazil in order to
boost its sales. In addition, four former executives also agreed to
pay penalties in cases that were related to the accounting
violation. According to the SEC, Orthofix used high discounts,
third parties and fake invoices in order to lure the doctors into
using the company's products.

In January 2017, Michael L. Cohen, the former head of Och-Ziff
Capital Management Group's ("Och-Ziff") European
office, and Vanja Baros, a former executive of Och-Ziff who worked
on deals related to Africa, were charged with violating the FCPA
and the Securities Exchange Act, and with aiding and abetting
Och-Ziff's violations. According to the SEC, the former
executives allegedly orchestrated a bribery scheme worth millions
of dollars involving high-level government officials in Africa,
which resulted in an investment by the Libyan Investment Authority
(Libya's sovereign wealth fund) in funds that were managed by
Och-Ziff. They also allegedly attempted to pay bribes to government
officials in Chad, Niger, Guinea, and the Democratic Republic of
the Congo, in order to secure mining deals. Och-Ziff and two other
executives had already settled the charges brought against them in
2016.

In July 2017, Halliburton, an American oil field services
company, agreed to pay the SEC more than $29.2 million in order to
settle the charges brought by the SEC with regard to the selection
and payment processes of a local company with close ties to Angolan
public officials, with the goal of winning oil field services
contracts from the government. According to the
SEC, the company outsourced its business to a local company whose
owner was a former Halliburton employee and who also happened to be
the friend and neighbor of the Sonangol official who would award
the contracts. According to the SEC, the company entered into a
relationship with this company not because of the work that the
local company would carry out on its behalf, but solely in order to
meet the local content regulations. The company's former vice
president Jeannot Lorenz, also agreed to pay a $75,000 penalty to
the SEC in relation to the same investigation.[2]

[1] The pilot program provides
companies with the opportunity to receive declination decisions, in
case these companies meet the conditions put forth in "The
Fraud Section's Foreign Corrupt Practices Act Enforcement Plan
and Guidance."

Companies and other corporate bodies operating in Ireland will risk criminal liability if they do not have adequate anti-corruption policies and procedures in place, once proposed anti-corruption legislation becomes law.

The emergence of the so-called "Paradise Papers" has highlighted once again the conundrum faced by Parliament in legislating in response to the lawful avoidance of tax in offshore tax structures

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